Customs intermediaries penalized Rs.4,00,000 each for facilitating Red Sanders export through KYC failures under Section 114(i)

CESTAT Kolkata upheld penalties under Section 114(i) of Customs Act, 1962 against two appellants involved in attempted export of Red Sanders. The appellants failed to comply with KYC requirements and proper verification procedures for their clients in a transit clearance operation for Nepal-based cargo destined for Korea. Despite appellants' contention that no abetment allegations were made, the tribunal found their role as intermediaries facilitated export of banned goods through grave omissions at multiple stages. The court reduced penalties to Rs.4,00,000 each, considering the totality of circumstances while emphasizing their deliberate failure to ascertain client whereabouts and obtain necessary authorization documents.

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Issues:
Attempted export of Red Sanders in a Customs Transit Declaration (CTD) consignment, Penalty imposition under Section 114(i) of the Customs Act, 1962, Failure to comply with KYC requirements, Allegations of abetment, Statutory responsibilities of a Customs House Agent (CHA), Role of intermediaries in attempted export.

Analysis:
The judgment pertains to a case involving the attempted export of Red Sanders detected in a Customs Transit Declaration (CTD) consignment. The Order-in-Original imposed a penalty of Rs.50.00 Lakh each on the two appellants for their involvement in the case. The DRI officers interdicted a consignment of Red Sanders wood logs disguised as Nepalese cane handicrafts. Investigations revealed the involvement of various individuals and firms in the attempted smuggling operation.

The appellants, a Customs Brokers Firm and another trading company, were found to have failed in adhering to prescribed procedures and formalities. They did not fulfill the Know Your Customer (KYC) requirements as required by law. The appellants sourced the business through intermediaries without obtaining necessary documents or verifying the profiles of the exporters and importers involved. The adjudication order highlighted the gross failure and omission on the part of the appellants in performing their statutory responsibilities as Customs House Agents (CHAs).

The appellants argued against the imposition of penalties under Section 114(i) of the Customs Act, 1962, citing the absence of allegations of abetment in the Show Cause Notice. However, the Tribunal emphasized that the law allows for penalties for acts or omissions that render goods liable to confiscation, not just for abetment. The Tribunal found that the appellants' failure to comply with KYC requirements and their role in facilitating the attempted export warranted penalties.

The Tribunal considered the seriousness of the omissions and the role played by the appellants in the attempted export of banned goods. While acknowledging the lack of abetment allegations, the Tribunal concluded that penalties were justified based on the appellants' actions. A penalty of Rs.4,00,000/- each was imposed on the two appellants to meet the ends of justice. The appeals were disposed of accordingly, emphasizing the importance of fulfilling statutory responsibilities and complying with regulatory requirements in customs clearance operations.

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